In the American Scholar, George Watson writes about the forgotten Churchill — the Liberal who helped lay the foundations for Britain’s welfare state. Churchill was president of the Board of Trade in the Asquith government — a Liberal government that favoured free trade, a more regulated labour market and a government run system of social insurance. As Watson observes, it was not socialists or social democrats who conceived the welfare state:
In 1908, when Asquith became prime minister, there were almost no models of state welfare anywhere on earth. The exception was Bismarck’s Prussia, which to the dismay of German Social Democrats had instituted compulsory health insurance in 1883. That created a sudden panic on the left. Karl Marx had died weeks before, so the socialist leader August Bebel consulted his friend Friedrich Engels, who insisted that socialists should vote against it, as they did. The first welfare state on earth was created against socialist opposition.
By the new century Prussia was setting an example. Lloyd George and Churchill, as members of Asquith’s cabinet, went there to watch state welfare in action; Churchill, the more studious of the two, read published reports. In 1909 he collected his speeches in Liberalism and the Social Problem, where he made a case for seeing state welfare as an essential prop to a free economy. The Left had good reason to fear it, as he knew. Welfare promotes initiative, initiative promotes growth, and “where there is no hope, be sure there will be no thrift.”
While he supported free markets, Churchill rejected the idea that state intervention necessarily undermined self reliance. Many of his policy ideas would be considered left wing today. For example, in Liberalism and the Social Problem he argues that government should run job creation programs during recessions. "There is nothing economically unsound in increasing temporarily and artificially the demand for labour during a period of temporary and artificial contraction", he insisted.